Help for the (One-Time) Homeowners

Dean Baker is one of the country's leading left-wing economists. Andrew Samwick is the former chair of George W. Bush's Council of Economic Advisers. Chuck Schumer is the senior senator from the state that relies heavily on revenue from Wall Street. The three of them don't agree on much. But they do agree on a smart, common-sense plan to help struggling homeowners.

The idea is simple enough: Homeowners who can no longer afford their mortgage and are facing foreclosure would have the option to remain in their homes as renters paying the fair market rent, as decided by an independent appraiser. This solves a couple of problems: First, fewer families lose their homes. They may lose their equity in their homes, but they don't lose their homes. Second, fewer properties are left abandoned. It would have been a good idea to do this eight months ago. But it's still a good idea to do this now.

Dean Baker's explanation of the idea is here. The Baker/Samwick op-ed promoting the idea is here. Andrew Samwick's blog post revisiting it is here. Chuck Schumer's endorsement is here. Felix Salmon is enthusiastic. At this point, we've done a lot to help banks and traders and businesses and lenders. It's time we did something big to help those being foreclosed.

Most of the people we're talking about lost the equity in their homes quite some time ago. Maybe on Planet Madoff they could make mortgage payments for long enough that they might end up with some equity when the house is sold years down the line, but in this dimension the conversion to renting seems like a fine idea. So why the bleep can't we get it moving already, other than it would a) require more immediate writedowns on balance sheets and b) be considered by some not to provide sufficient punishment for former homeowners?